What is offshore HR? (Benefits, types of services)

by Andy Nguyen
Offshore HR

Human resource management is an essential part of any company as it helps monitor and support employees to realize company goals.

Now, many organizations offshore HR services to enhance their overall HR process and save money. These are just some of the benefits of offshoring HR.

But what exactly do you mean by offshore HR?

Should your business offshore human resources?

In this article, we’ll discuss offshore HR, its advantages, and the types of HR functions you can offshore. We’ll also cover some essential tips and FAQs related to offshoring HR services.

Let’s go!

Table of Contents

What is offshore HR?

You offshore HR when you relocate your human resource operations to another country. To do so, you can either hire an offshore HR service provider or set up your own HR team in a foreign country. 

But why offshore HR?

Many companies opt to offshore business processes to different countries for convenience and cost savings. This offshored team requires an HR department that can effectively work with them. That’s when companies begin to offshore HR to access better services at a lower cost.

Some popular destinations for offshore HR services are India, Vietnam, Malaysia, etc. Offshoring to such countries typically means access to an affordable talent pool, flexible work schedules, and efficient human capital management at a low cost.

Now, let’s look at a few HR processes you can send overseas.

4 functions your offshore HR department can handle

Here are some HR functions you can choose to offshore:

1. Recruitment process

Offshoring recruitment gives you access to HR specialists who’ll hire employees with the right competencies for your company.

They’ll conduct the whole recruitment process, from creating a job description to welcoming new hires, probably at a lower cost than the HR team in your home country. 

2. Employee onboarding and training 

Along with sending the offer letter and handling paperwork, HR professionals also welcome newly hired offshore employees. 

The offshore HR team can prepare necessary materials like training videos or emails, educating your new hires about their role and the company’s work culture. This will bridge the gap between the parent company and the new offshore employees – boosting employee satisfaction as well as employee loyalty.   

3. Payroll management

Payroll management needs to be handled by an experienced HR as it includes a range of functions from managing employee attendance to keeping track of legal regulations like tax laws. 

For instance, if you have an offshore development team in Brazil, an offshore HR team from the same country can better handle operations. The offshore team can efficiently handle the payroll process and comply with local laws and regulations better than your home country’s HR department. 

These HR teams will also have secure computer systems and network connections to ensure the privacy of sensitive data like employee details, banking records, company information, etc.

4. Benefits administration program

Many firms offshore their benefits administration, like managing travel allowances, medical insurance, wellness coupons, etc., to offshore HR teams to save time, reduce liabilities, and cut costs. 

These offshore HR teams can also get benefit packages at a discounted rate by mass-buying them for multiple clients – offering you the best prices. 

Moreover, offshoring benefits administration is beneficial if you have offshore teams in a foreign country, as you’ll have no idea of the work culture and the benefits offered there. 

For example, companies offshoring to Germany have to offer benefits like transportation allowances or a 30-day paid annual leave. In such cases, it’s better to offshore benefits administration as they have a better idea of that country’s employee expectations and benefits packages. 

These offshore HR teams will manage the packages, ensure legal compliance and track benefits-related deductions. 

Now, let’s check out some advantages of offshore HR.

4 incredible benefits of an offshore HR

Here are four reasons why you should offshore your HR processes:

1. Affordable labor

Many organizations in the United Kingdom and the United States offshore HR jobs to developing countries like Brazil, Taiwan, India, etc., because of their affordable HR services.

For example, the average salary of an HR manager in India is approximately USD 7,505/year. When you compare it to the average salary of an HR manager in the United States (USD 148,000/year), it’s very low. 

You can also save overhead costs, such as offices, technology, or specialized HR software, by offshore outsourcing to an HR consulting agency as they already have their own infrastructure. 

2. Better time-saving

An offshore HR agency can give you access to human resource management software to automate any HR function to ensure greater efficiency of HR operations. 

Some functions include:

  • Employee administration
  • Payroll
  • Recruitment
  • And more! 

This means you’ll need to spend less time researching the most effective HR software. 

3. Reduced risks

Tracking an offshore location’s laws regarding recruitment, taxations, employee insurance, etc., may be difficult and time-consuming.

Offshore HR managers or agencies, however, stay up-to-date on the latest developments in their fields. They’re experts with sufficient knowledge to make decisions to protect your company from potential legal hassles.   

Additionally, HR functions come with many risks like wrongful termination and workplace injuries as well as liabilities like retirement benefits, payroll, etc. 

For example, the IRS (Internal Revenue Service) incurs 15% of the unpaid tax for every additional month for late payroll filing. Offshore teams can handle these risks better as they’re more aware of the offshored country’s latest guidelines.   

So outsourcing to an expert offshore HR team will ensure legal compliance and protect you from risks.

4. Increased employee satisfaction

Since human resources management is their sole specialization, offshore HR teams can pay more attention to details that affect employee satisfaction. 

You can also opt for diversity, equity, and inclusion (DEI) programs to help you become an equal opportunity employer.

As a result, all your employees will feel included and taken care of – boosting their workplace morale as well as your company’s growth.  

Now that you know the many advantages of offshoring HR services, let’s look at some essential points to keep in mind before embracing offshore HR.

2 important criteria for offshore HR

Here are two essential aspects to note before you decide to offshore HR:

1. Quality of service

Offshoring services sometimes result in different productivity standards between the offshored HR team and the parent company. So it’s essential to ensure an offshore HR service matches your company’s service quality.

You can use trial periods to check their HR policies and productivity standards before hiring them full-time.

You can also use software to ensure easy communication or tools like Time Doctor to monitor your offshore HR teams’ activities. These tools will help you track working hours, generate detailed reports, and monitor productivity in real-time.

2. Compliance with laws and regulations

An offshore HR service provider must be familiar with both countries’ HR-related laws. 

For example, a Canadian company offshoring recruitment services to Malaysia must ensure that their offshored HR team knows about Canadian laws like Employment Standards Act and the Pay Equity Act.

Additionally, these agencies should follow the local Malaysian laws to avoid fines and interruption of smooth service delivery due to legal issues. This way, you can avoid additional costs, interrupted workflow, and delayed services.

Next, let’s check out some common FAQs on offshore HR.

3 FAQs on HR and offshoring

Here are the answers to some common offshoring and HR questions:

1. How does offshoring HR impact the company?

Here are three different aspects that are affected by offshoring your HR services:

A. Technology

Moving HR operations offshore requires the company to also make modifications at home. 

For example, you need to invest in workstations, fast internet connections, and good HR software for better workflow and communication between the offshored HR team and their colleagues at the parent company.

B. Work culture differences

Your HR team is a bridge between your home and offshored country’s culture. The foreign country’s local standards determine your offshored team’s benefits, schedules, and pay.

For example, your offshore HR employees may not be willing to work on local holidays. So you need to consider the local cultures, customs, holidays, etc., of your offshore and home country employees when you create a work schedule. 

This’ll ensure uninterrupted workflow, easy communication, and employee satisfaction.

C. Linguistic differences

Although most offshore human resources professionals from countries like Malaysia, South Africa, Mexico, etc., are fluent in English, they may use different accents and slang.

To avoid such problems, you can offshore HR jobs to a linguistically similar country. Or, you can ensure that your offshore HR team has taken language training like accent neutralization.      

2. What are the different industries that offshore HR?

Here are a few top industries that offshore HR:

A. Shipping and cargo

Due to readily available cheap labor, many foreign firms hire their shipping crew from countries like China, India, the Philippines, etc. 

The HR department in the foreign company’s home country may find it challenging to communicate with the local crew because of the difference in language and work shifts (time zone gap).

To fix this issue, firms offshore HR services to the same country as the crew. An offshore HR team can handle local import and export laws, offshore crew recruitment, and working conditions on vessels better than an HR team in the home country.

B. Information Technology (IT)

IT services like software development, assembling, coding, etc., are commonly offshored to countries like Costa Rica, Malaysia, and Poland. This is due to the availability of information technology, infrastructure, and skilled tech employees – at a low cost.

So it makes more sense to offshore HR services too. This’ll ensure the recruitment of highly-skilled staff, compliance with local IT laws, and data security.

C. Oil and gas industries

Offshore oil drilling requires skilled offshore drilling engineers, mechanics, technical supervisors, etc. These employees are often exposed to chemicals and must work with heavy machinery on tasks like assessing oil pipelines, oil drilling, etc. Such potentially hazardous conditions need a good oil energy safety service.  

You can hire an offshore HR team from the location of your offshore oil drilling firm to help you out with such processes. These offshore HR teams can ensure skilled staffing, carry out your offshore operation cost-efficiently, and protect your offshore team with good insurance as well as benefits packages.

D. Construction

Real estate companies and hotel chains in countries like Maldives, Bali, Seychelles, etc., often offshore HR services.

Offshoring HR services to these countries will help maintain investor relations, ensure legal compliance, and hire the right employees for your firm.

2. Which are the best countries for offshore HR?

Here are the three incredible countries you can offshore HR to:

A. The Philippines

The country offers highly-skilled HR specialists at low costs. The average salary of a human resource manager (USD 14,678/year) is low compared to the US (USD 148,000/year).

The offshore HR employees are familiar with western culture and English – paving the way for easy communication.   

Check out these detailed articles on the Philippines:

B. Brazil

Brazil has an impressive digital technological infrastructure with 5G connectivity on the way for smooth, uninterrupted HR services.

It offers an affordable talent pool of HR professionals at an average salary of USD 20,465/year. 

Read these articles to find out more about Brazil:

C. India

According to AT Kearney’s outsourcing report, India is the top outsourcing destination globally. It offers a business-friendly environment supported by skilled labor, evolving technology, and infrastructure.

The country offers affordable HR services as the average salary of an HR manager in India is USD 4,772/year, making it a favorite for giants like HSBC and GE Capital.

Planning to offshore to India? Check out these articles on India:

Wrapping up

A solid offshore HR strategy can increase company efficiency, develop good HR policies, and improve your employees’ satisfaction – helping your business grow.

Use our ultimate guide to offshore HR services to scale your company and keep your employees happy!

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